Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Whether certain amounts received are taxable.
Position TAKEN:
General information provided.
Reasons:
Insufficient information.
XXXXXXXXXX T. Young, CA
2003-000462
April 16, 2003
Dear XXXXXXXXXX:
Re: Respite Care
We are writing in response to your letter February 21, 2003, concerning amounts received by caregivers from various social agencies in British Columbia.
In your letter, you outlined two scenarios:
1. The caregiver receives funds to pay for respite care for disabled persons living in the caregiver's home. The respite care providers may stay in the caregiver's house or the disabled person may stay with the respite care provider.
2. The disabled person receives funds to pay for care for his or her children so the disabled person can attend medical appointments or receive counselling.
You stated that some of the recipients of the funds are concerned that they may be liable for income tax on the funds and that they may be responsible for T4 reporting and payroll deductions on the amounts paid to the respite care providers. No T5007 slips have been issued.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. In addition, we would also require specific details about the specific assistance programs and the various payments. However, we are prepared to provide the following comments, which may be of assistance to you.
Scenario 1
In general, the funds received by the caregivers would be treated the same as any other funding they receive to provide care. In other words, if the caregivers receive funds that are exempt pursuant to paragraph 81(1)(h) of the Act (e.g., payments for foster care), the funds received by the caregiver to pay for respite care would also be exempt. If the funding for respite care received by the caregivers constitutes social assistance, the amounts received will be included in income pursuant to paragraph 56(1)(u) of the Act. Payments included in income under paragraph 56(1)(u) of the Act are not subject to Part I tax because they are deductible in computing taxable income in accordance with paragraph 110(1)(f) of the Act. It should be kept in mind that there are exceptions to the reporting requirements of social assistance payments that may be applicable. These can be found in the guide, T5007 Guide - Return of Benefits (T4115).
In situations where the caregiver engages another individual to provide the respite care, it is our general view that the amounts paid by the caregiver to the respite care provider will be either employment or business income to the recipient. Accordingly, whether there is an employer-employee relationship between the caregiver and the respite care provider will depend on the facts of each situation. For more information on employer-employee relationships, see the pamphlet called "Employee or Self-employed?" (RC4110).
Scenario 2
Our views on this scenario are the same as in the first scenario except as follows. Since the parents are receiving the funding for the care of their children, paragraph 81(1)(h) would not be applicable. Therefore, the amounts received by the parents are likely social assistance pursuant to paragraph 56(1)(u) of the Act that are deductible in computing taxable income under paragraph 110(1)(f) of the Act. In particular, payments in respect of medical expenses do not have to be reported on a T5007.
As in the first scenario, the amounts paid by the parents to the respite care provider may be either business or employment income and is dependant on the facts of the situation.
Taxpayers may contact the Client Services Division of their local Tax Services Office to obtain assistance in determining the income tax treatment of specific payments.
The documents referred to above may be found on our web site at www.ccra.gc.ca. We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
- 2 -
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2003
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2003